Highlights

SGH reports are highly valued for keeping clients and policymakers informed and well-ahead of consensus and the news cycle on the macro policy events driving global markets.

2021
March 10, 2021
SGH Insight
Though a close run thing, we think the 2023 median rate plot will not show a rate hike. It would require five or more of the now 18 FOMC members to join the five who in December had already penciled in one or more hikes in 2023. On balance, we think it unlikely. The linchpin to that more benign rate dot plot outcome, even if markets latch on to any signs of earlier hike expectations by a growing FOMC minority, will be core PCE projections that steadily rise across the forecasting horizon but remain still shy of an inflation overshoot in the 2023 median.
Market Validation
(Market Watch 3/17/21)

Dow Up 160 Points As Stocks Turn Higher After Fed Policy Announcement

Stock-market investors reacted positively to the Federal Reserve's policy announcement, erasing losses or extending minor gains after the central bank signaled it expected no change in interest rates through 2023 even as inflation slightly overshoots its target. The Dow Jones Industrial Average jumped as much as 200 points at its high and remained up around 160 points.

(Bloomberg 3/17/21)
Greenback Extends Broad Drop Ahead of Powell on Rate Outlook

The greenback is at a session low ahead of Fed Chair Jerome Powell’s press conference as traders sell the dollar on expectations the central bank will be on hold for the foreseeable future.

The Bloomberg Dollar Spot Index is -0.3%; commodity and emerging market currencies leading gainers; yields rise

EUR/USD is +0.5% at 1.1958 after stops are triggered above the key pivot level of 1.1952, the Feb. 5 low; eyes double top ahead of 1.20
USD/JPY erases advance and trades at 108.95


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March 10, 2021
SGH Insight
I take the Fed’s position that rate hikes are unlikely until after 2023 as a baseline (of course we get new dots next week but I don’t anticipate they will move enough to show a change in the median 2023 rate forecast). The degree of job growth needed in addition to actual inflation makes this a reasonable expectation in light of the Fed’s new policy framework.
Market Validation
(Bloomberg 3/17/21)

UST 5s30s Curve Steepens 10bp Toward 2021 High, Most in a Year

Treasury yield curve is sharply steeper in response to Federal Reserve message being articulated by Chair Powell following FOMC decision, widening 5s30s spread by 10bp, its biggest increase in a year. Front-end and intermediate yields are falling as Powell sounds dovish tones, saying it’s premature to discuss tapering asset purchases and that an announcement on SLR exemption is planned in the coming days.

Five-year yield declined as much as 6.5bp to 0.764%, while 30-year remains nearly 5bp higher on the day at around 2.42%; 5s30s curve touched 166.3bp, within 1bp of its 2021 high on Feb. 24

10-year yield briefly erased an increase of as much as 7bp to 1.689%, the highest level since January, reached before the FOMC decision; 10-year futures are near best levels of the day around 132-06

Gains led by belly of the curve richened the 2s5s10s fly by 9bp on the day while 2s10s spread exceeded 150bp for the first time since 2015

Long-end lag reflects focus on inflation outlook, and steepening of 5s30s curve by more than 10bp is largest one-day move since March 17, 2020, during the liquidity crisis
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March 09, 2021
SGH Insight
** The pace of these purchase will therefore be a topic for discussion at the Executive Board meeting today and at the wider Governing Council discussions tomorrow and Thursday. We expect the pace of PEPP purchases will be modestly stepped up as a signaling device to lean into rising yields, but within its overall “envelope” of 1.85 trillion euros that leaves plenty of room for such flexibility, as (almost) no Council member thinks the program itself needs revision. As of March 5, the ECB had conducted 878 billion euros in PEPP purchases, leaving almost a trillion still unused in its arsenal.
Market Validation
(Bloomberg 3/11/21)

Euro Fades, Bond Yields Dip as ECB Signals Faster Bond Purchases

The euro dipped from the day’s highs and German 10-year bond yields declined after the European Central Bank indicated it will step up the pace of purchases under its PEPP program over the next quarter. Rates were kept unchanged as expected.
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March 04, 2021
SGH Insight
Saudi Arabia is likely to press at today’s OPEC+ meeting for a “calibrated” increase in the group’s crude oil output starting in April, staggering an easing of its own voluntary withholding of one million barrels per day over the next few months, a cautious approach that should keep a more bullish tone to crude prices and which Riyadh believes will help stabilize benchmark crude prices in a narrow $62 to $68 a barrel price range.

The Saudi oil delegation, led by Prince Abdul Aziz al-Salman, will concede some additional output by Russia and some of the most fiscally hard-pressed OPEC+ members. But in effect, the Saudis oil stance means it is more likely than not that OPEC+ will be increasing its collective oil output by no more than 500,000 additional barrels per day in April, and only slowly building up to some 1.5 million bpd in extra crude output through the next several months.
Market Validation
(Bloomberg 3/4/21)

OPEC+ decided to keep a tight limit on oil production next month, sending prices soaring in a market that had been expecting additional supply.

The agreement is a victory for Saudi Arabia, which has consistently pushed to tighten the market. It leaves the world facing a significant supply squeeze, higher energy costs and the risk of inflation just as widespread vaccination allows economies to emerge from the Covid-19 downturn.

The cartel had been debating whether to restore as much as 1.5 million barrels a day of output. But after being urged to “keep our powder dry” by Saudi Energy Minister Prince Abdulaziz bin Salman, members agreed to hold steady at current levels -- with the exception of modest increases granted to Russia and Kazakhstan.
In a briefing after Thursday’s meeting, the prince went one step further by making the kingdom’s additional 1 million barrel-a-day production cut open ended. He gave no date for phasing out the voluntary reduction and told reporters he is in no hurry to do so.

Russia and Kazakhstan secured exemptions from the deal, allowing them to boost output by 130,000 and 20,000 barrels a day in April, respectively, “due to continued seasonal consumption patterns,” according to a statement posted on OPEC’s website. The two nations were granted similar allowances for February and March.

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March 02, 2021
SGH Insight
** And while expectations in general are that Beijing will, like last year, refrain from setting a formal GDP target for 2021, our understanding is that Premier Li Keqiang will propose an option to the NPC Standing Committee, whether adopted or not, of setting an easily met GDP target of above 6.0% as well. The Politburo’s expectations are for GDP growth this year to fall in the 8.3 - 8.5% range.
Market Validation
Policy Validation

(Bloomberg 3/5/21)

China set a conservative economic growth target that signals more restrained monetary and fiscal policies this year, in contrast to other major nations still pumping in stimulus to support growth. The government set a growth target of above 6% for the year, well below what economists forecast, and will narrow the
budget deficit to 3.2% of gross domestic product, Premier Li Keqiang said Friday at the opening of the National People’s Congress. While the fiscal gap is lower than last year, it’s above the 3% expected by many analysts, signaling Beijing still
sees a need for spending to support the recovery. “A target of over 6% will enable all of us to devote full energy to promoting reform, innovation, and high-quality
development,” said Li.
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March 01, 2021
SGH Insight
So how does the Fed deal with this situation? After all, the Fed can’t yet prove it won’t hike rates in 2023 or even 2022 because it really just doesn’t know whether it will or not. The Fed can only prove itself by not hiking too early – before its mandates have been met – and we aren’t yet even to the point of tapering. The Fed instead can enhance its rhetoric this week that emphasizes its policy intentions and expectations. Given that market participants are front-running the Fed and know it, a slight change in tone can trigger a reassessment of prospects for Fed tightening. The kinds of phrasing that I am watching for this week include:
1. “…disorderly market adjustments are not desirable…”
2. “…we do watch long term yields to ensure they are consistent with our objectives…”
3. “…disorderly adjustments that lead to a slower recovery will delay lift-off from the zero bound…”
4. “… we have additional tools that we can use to help meet our objectives…”
Market Validation
(Bloomberg 3/2/21)

Treasuries Firm; Brainard Says Last Week’s Swing ‘Caught My Eye’

Treasuries continue to trade with a bid tone across belly of the curve, which extended outperformance as Federal Reserve Governor Lael Brainard sounded a dovish tone concerning last week’s bond market volatility.

Outperformance by intermediate sectors tightened 2s5s10s fly by 4.5bp on the day as 5-year yields shed 2.5bp outright Treasury 10-year note futures are near session highs, with yields slightly richer vs Monday’s close, while 30-year yields remain ~2bp cheaper on the day
Brainard said she’s paying close attention to market developments and that the speed of last week’s moves caught her eye

Around the same time Fed’s Daly said the central bank needs to be patient in implementing its new monetary policy strategy


Policy Validation

(Bloomberg 3/2/21)

Brainard Says Recent Bond Market Moves Have ‘Caught’ Her Eye
Fed governor cites improving outlook while noting risks remain
Says economy remains far from Fed’s goals for inflation, jobsBy Craig Torres

Federal Reserve Governor Lael Brainard said it will take “some time” to meet the conditions laid out by the U.S. central bank for reducing the pace of its massive bond purchases, while noting recent bond market volatility.

“I am paying close attention to market developments,” she said Tuesday in response to a question after giving a speech. “Some of those moves last week, and the speed of the moves, caught my eye. I would be concerned if disorderly conditions or of a persistent tightening in financial conditions that could slow progress towards our goal.”



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February 26, 2021
SGH Insight
Federal Reserve officials may be feeling a bit shell-shocked by the violent price action in the bond markets on Thursday, but their concern is less about the surge in longer-dated treasury yields – they really are ok with it, at least so far – than more specifically the snap in short rates, pulling forward around three hikes priced in for 2023 and with even some optionality creeping into 2022.

** Fed officials will be watching the markets closely today to gauge how much of yesterday’s chaotic markets were driven by technical one-off factors that more or less correct. But if the pricing on rate hikes looks to persist, our sense is that Fed officials are very likely to verbally intervene to push back, with the aim to regain control of the policy narrative on the lagged reaction function under the new policy framework.


Market Validation
(Bloomberg 3/2/21)

Treasuries Firm; Brainard Says Last Week’s Swing ‘Caught My Eye’

Treasuries continue to trade with a bid tone across belly of the curve, which extended outperformance as Federal Reserve Governor Lael Brainard sounded a dovish tone concerning last week’s bond market volatility.
Outperformance by intermediate sectors tightened 2s5s10s fly by 4.5bp on the day as 5-year yields shed 2.5bp outright
Treasury 10-year note futures are near session highs, with yields slightly richer vs Monday’s close, while 30-year yields remain ~2bp cheaper on the day

Policy Validation

(MarketWatch 3/2/21)

Fed's Brainard expresses unease about last week's bond market turmoil

Size and speed of last week's bond market selloff caught her eye, Fed Governor says
Federal Reserve Governor Lael Brainard on Tuesday became the first top official at the central bank to express unease about last week's sharp rise in longer-term U.S. Treasury yields.
Asked about the bond market during a talk at the Council of Foreign Relations, Brainard said she was "paying close attention to market developments."
"Some of those moves last week and the speed of the moves caught my eye," Brainard said.
"I would be concerned if I saw disorderly conditions or persistent tightening in financial conditions that could slow progress" towards the central bank's twin goals of a strong labor market and stable 2% longer-run inflation.

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February 22, 2021
SGH Insight
Fed Watch Bottom Line

The Fed remains unconcerned by rising long yields. In a sense, such increases driven by an improving economic outlook are welcome. The Fed would be more concerned if market pricing for a rate hike moved into 2022. Policy makers would have a hard time seeing that as consistent with their signaling and the current data flow. Remember, while they are very much paying attention to the totality of the data, policy makers are primarily looking at employment and inflation moving substantially closer to their objectives before they strongly signal a more imminent change in policy.
Market Validation
Policy Validation

(Bloomberg 2/23/21)

*POWELL: RATES ARE MOVING UP DUE TO HIGHER GROWTH EXPECTATIONS
*POWELL: LOOK AT BROAD RANGE OF CONDITIONS, INCLUDING YIELDS
*POWELL: MOVE IN YIELDS REFLECTS MORE CONFIDENCE IN THE ECONOMY
*POWELL: EXPECT US TO MOVE CAREFULLY AND PATIENTLY OVER TIME
*POWELL: THERE'S LONG WAY TO GO, WE'RE 10M JOBS BELOW PRE-VIRUS
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February 22, 2021
SGH Insight
** We expect Chairman Powell and his FOMC colleagues to stick close to the script since the January FOMC meeting: the recovery, though definitely promising, is still far from certain much less the labor market gains being widely shared, and a still subdued, inertial inflation is the greater near risk than “temporary” upward price pressures; that translates into a full throated support for an aggressive fiscal policy and for the Fed’s own optimal rates and balance sheet policy to firmly remain on a highly accommodative path.
Market Validation
Policy Validation

Bloomberg 2/23/21

Powell Signals Continued Fed Aid for Economy He Sees Improving
By Rich Miller
Federal Reserve Chairman Jerome Powell signaled that the central bank was nowhere close to pulling back on its support for the pandemic-damaged U.S. economy even as he voiced expectations for a return to more normal, improved activity later this year.
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” he said in the text of testimony to be delivered Tuesday to the Senate Banking Committee.
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February 18, 2021
SGH Insight
More flexibility in ETF purchases
The calls on and from what we understand even within the BOJ have been mounting to adjust the scale of its equity ETF purchases linked to the Nikkei and Topix indices as Japanese stock markets hit highs not seen for a generation.

We expect the policy review is likely to add some additional flexibility to the BOJ ETF program to enable the central bank to reduce its purchases when markets are high, or rising steeply, and to increase them when they are low, albeit without committing to any specific price levels or metrics.

Expansion of the 10-year JGB band guidance.
As we flagged just under a month ago, (see SGH 1/20/2021; “BOJ: Positioning for Steeper H2 Curve”), we believe the Bank of Japan is more than likely to expand the band within which it allows the 10-year JGB to trade by ten basis points on each side, from plus or minus 0.2% around 0.0%, to plus or minus 0.3%.
Market Validation
(Bloomberg 3/19/21)

The Bank of Japan unveiled a set of carefully crafted policy tweaks aimed at giving itself more flexibility to keep up its long quest to revive inflation.

The bank set out a wider-than-previously-thought movement range for bond yields and scrapped a buying target for stock funds at the end of a three-month policy review.
While the currency and bond markets largely took the moves in stride, the BOJ’s decision to focus its purchasing of exchange-traded funds on the wider Topix index drove down shares on the Nikkei 225.

Many of the tweaks will give the BOJ greater scope to buy fewer assets and could be viewed as a stepping back from stimulus, but the central bank characterized the changes as shoring up the effectiveness and sustainability of its measures over the longer run.
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February 16, 2021
SGH Insight
Tim Duy's Insight

The Fed is joining with the Biden administration to supercharge the economy.
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February 10, 2021
SGH Insight
Tim Duy's Fed Watch

Bottom Line: Given that incoming fiscal stimulus looks more designed for a 2007-09 recession than the current cycle, what am I watching for? First, signs that the inflation/wage dynamic flips into something that would be interesting from an inflation perspective. I don’t expect that anytime soon. Second, how much fiscal stimulus gets pushed in to savings and the subsequent impact on asset prices. Third, the Fed’s reaction to improving economic forecasts and how those improvements become realized in the SEP. Fourth, the Fed’s commitment to its new strategy and in particular the emphasis on realized outcomes. That shouldn’t change anytime soon.
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February 10, 2021
SGH Insight
G7 Finance Ministers and Central Bank Governors will meet virtually on Friday, February 12, under the chairmanship now of the UK, which just took over its rotating presidency for 2021.

** According to various sources, senior G7 financial policymakers expect to discuss enhanced coordination of fiscal stimulus in response to the Covid-19 pandemic – who does what and for how long – and to reaffirm their commitment to supporting their respective economies and to averting a situation in which a premature or unexpected withdrawal of fiscal stimulus, especially in one of the major economies, could hurt the others.

** There is also likely to be discussion on Friday of boosting the International Monetary Fund’s war chest by an additional 500 billion Special Drawing Rights (SDRs), as proposed by IMF Managing Director Kristalina Georgieva last year, or, more controversially, by an even larger amount – as high as the 1-2 trillion SDRs that has been suggested for example by former US Treasury Secretary Larry Summers. The purpose of these additional lines would be to help the IMF assist smaller countries around the world with additional financing needs arising from the pandemic.
Market Validation
Policy Validation

(Reuters 2/12/21)

ROME — Finance ministers from the Group of Seven (G7) rich nations have committed to continuing coordinated action to support the economy, Italian Economy Minister Roberto Gualtieri said on Friday.

“G7 ministers confirmed today their common and coordinated commitment to support the recovery and to set the conditions for a sustainable and inclusive growth. The withdrawal of policy support is premature,” he wrote on Twitter after an online call with his G7 peers.

(National Post 2/12/21)

Japan's Aso: G7 finmins discussed support for low-income countries

Financial leaders from the Group of Seven (G7) rich nations discussed support for low-income countries and new allocation of special drawing rights at the International Monetary Fund (IMF) in a virtual meeting, Japanese Finance Minister Taro Aso said on Friday.

Aso was speaking to reporters after attending Friday's online meeting with his G7 peers under the United Kingdom as new chair.

(Bloomberg 2/12/21)

In her first call with foreign counterparts and central bankers from the G-7, Yellen said that “the time to go big is now” and that the group should focus on how to help the economy, the U.S. Treasury Department said in a statement after the virtual meeting held on Friday. The U.K. is the rotating head of the G-7 this year.
The U.S. is leaning toward backing an increase in the IMF’s special drawing rights by as much as $500 billion, Bloomberg News reported earlier this month. The fund has been lobbying for more help to support developing nations against the Covid-19 crisis. A decision could come as soon as this month.
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February 09, 2021
SGH Insight
There is a shared “eyes on the prize” between the Fed and Treasury to foster a high-pressure economy through an amply accommodative monetary policy underpinning an aggressive fiscal policy. We expect Chairman Powell will keep a newly unified Fed messaging firmly on a distant outcomes-based policy path through any stronger than expected near term growth. That means the Fed will “look through” an expected pop in measured inflation this spring or a continued rise in inflation expectations, and will push back against hawkish market pricing doubting the central bank’s current balance sheet and rates policy stance.
Market Validation
Policy Validation

FT 2/10/21

Jay Powell stressed the importance of “patiently accommodative” monetary policy to support the struggling US labour market, warning that achieving full employment in the world’s largest economy will not be easy. In prepared remarks to the Economic Club of New York on Wednesday, the chair of the Federal Reserve said US employment was far from its pre-pandemic level. He did not reveal any anxiety about a rise in inflation later this year triggered by President Joe Biden’s $1.9tn fiscal stimulus plan. “Despite the surprising speed of recovery early on, we are still very far from a strong labour market whose benefits are broadly shared,” Powell said. “Employment in January of this year was nearly 10m below its February 2020 level, a greater shortfall than the worst of the Great Recession’s aftermath.” Powell also indicated that US policymakers, including health officials, fiscal authorities and central bankers, would still have plenty of work to do in order to close that gap, suggesting the Fed did not see a quick end in sight to the economic downturn triggered by the pandemic.
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February 08, 2021
SGH Insight
Tim Duy Fed Watch:

Bottom Line

Monetary policy will be held steady until the data suggests otherwise. Fed speakers should continue to reinforce the Fed’s updated policy strategy. Remember that the Fed is erring on the side of overshooting.
Market Validation
Policy Validation

(Dow Jones 2/11/21)

Fed's Daly Sees Central Bank Maintaining Its Bond-Buying Pace Through 2021

Federal Reserve Bank of San Francisco leader Mary Daly said the U.S. central bank is unlikely to pull back on its bond-buying stimulus this year, and that another round of government aid shouldn't overheat the economy.
The official said she continues to expect the U.S. economy to pick up speed over the second half of the year, as vaccinations roll out and allow the economy to emerge from the shadows of the coronavirus pandemic. But even as the nation emerges from the crisis, it won't yet be time for the central bank to pull back on its $120 billion a month in bond buying, she told The Wall Street Journal on Wednesday.

"For now, we have policy in a good place," Ms. Daly said. "If you take the lens of my modal outlook, then it's really continuing to purchase at the current pace through the end of this year."
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February 04, 2021
SGH Insight
The full-year rare earth mining quota for 2021 has been set at 140,000 tons, the same as in 2020. Officials expect the actual (as opposed to target) production of rare earths to come in slightly below that, at 130,000 tons. For reference, the rare earth mining quota for 2019 was set at 132,000 tons, and for 2018 it was 120,000.

China will also continue to tightly control the export of other strategic and scarce materials for 2021. Natural graphite, tungsten, magnesium, and manganese export quotas will remain unchanged from 2020, already down over 40% year on year from 2019, and from previous year, levels.

Market Validation
(Bloomberg 2/16/21)

China is exploring whether it can hurt U.S. defense contractors by limiting supplies of rare-earth minerals that are critical to the industry, the Financial Times reported. Industry executives said government officials had asked them how badly companies in the U.S. and Europe would be affected if China restricted rare-earth exports during a bilateral dispute, the FT reported, citing people it didn’t identify involved in the consultation.
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February 04, 2021
SGH Insight
Tim Duy Fed Watch

That phrasing “look for leadership from the chair” is something to think about. It sounds like Powell is taking on a very Greenspan-esque, top-down management role as if he will tell the presidents when it is time to talk about tapering. This could be very important in setting up a discontinuous break in communications. As I said earlier this week, we should be anticipating the change in policy before the Fed talks about that change. If Powell is taking charge, we may get few little rumblings before that change. It will all be deny, deny, deny followed by a big announcement. The data should already be bringing us to that point if the Fed is communicating the meaning of “substantial progress” so it shouldn’t be too jarring, but it is clearly something to be watching.

Market Validation
Policy Validation

“The committee has said we are going to wait for further progress on our goals. I gave a rosy outlook today but it’s only an outlook. I would definitely want to see whether this materializes or not before getting into any adjustments to policy”

“The chair has wanted to start that conversation only when it’s appropriate and not get ahead of ourselves even though we do have high hopes the pandemic will come to an end”

Bullard speaks with reporters Thursday after giving presentation on the economic outlook
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February 03, 2021
SGH Insight
Tim Duy's Fed Watch:

Bottom Line: Just because the Fed has stopped talking about the timing of the tapering discussion doesn’t mean we can’t start thinking about anticipating that timing. We should be thinking about it in terms of the data and not waiting for Fed officials to give the green light. Keep the focus on jobs and inflation; the Fed will not be distracted by the recent events in financial markets.
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January 28, 2021
SGH Insight
In a message that appears clearly intended to counter increasingly hawkish rate expectations, senior sources from the People’s Bank of China convey that the key short-term interest rates that have just hit six-year highs [NB – on stronger growth prospects and PBoC liquidity mopping operations] should not be interpreted as a signal that the central bank is starting to shift to a tighter monetary policy stance, and that investors should not “overly exaggerate" the impact of the central bank’s short term liquidity operations on China’s stock and bond markets.

Today (Friday, Beijing time) marks exactly two weeks to the start of China’s major Spring Festival holidays, and our understanding is that over these next two weeks the PBoC will resume open market operations, including resumption of the 7-day and 14-day reverse repos [NB -- the reverse repo nomenclature in China refers to easing, not tightening operations as it does in the West], and will conduct medium-term lending facility operations to offer sufficient liquidity to help banks get through the Chinese New Year holiday.
Market Validation
Policy Validation

(Bloomberg 1/29/21)

PBOC Says Market Talk of SLF Rate Hike ‘Untrue’

PBOC says it has noticed the rumor about potential SLF rate hike and has reported it to the police, the Chinese central bank says in a reply to Bloomberg News.

China's central bank on Friday conducted 100 billion yuan (about 15.45 billion U.S. dollars) of reverse repos amid rising fiscal expenditure at the end of the month.

The move aims to maintain reasonably ample liquidity in the banking system, according to a statement on the website of the People's Bank of China.

The interest rate for the seven-day reverse repos was set at 2.2 percent, the central bank said.
With 2 billion yuan of reverse repos maturing on the same day, the move led to a net liquidity injection of 98 billion yuan into the market.
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January 26, 2021
SGH Insight
** We expect Chairman Powell will in fact shy away from going into too much detail on either the tapering or rates lift-off scenarios, and to instead put his accent not on the eventual exit, but on the long runway of communications in the approach to changes to come on either policy front. There will be a sequence of policy messaging through this very critical year, and in the near term, the emphasis will stay on the Fed’s very dovish reaction function to keep the US economy running as hot as possible for as long as possible.


Market Validation
Policy Validation
(From Chair Powell's press conference 1/27/21)

You know, in terms of tapering, it's just premature. We just created the guidance. We said we want to see substantial further progress toward our goals before we modify our asset purchase guidance. It's just too early to be talking about dates. We should be focused on progress that we'll need to see actual progress. When we see ourselves getting to that point, we'll communicate clearly about it to the public. So nobody will be surprised when the time comes. We'll do that well in advance of actually considering what will be a pretty gradual taper. >> If I might, your policies are working and you can do more, the question is can you stop doing it when it's time? >> Chairman Powell: Yeah. So I was here -- we had all the same questions back in -- after the global financial crisis. We raised interest rates, we froze the balance sheet size and slang the balance sheet -- shrank the balance sheet size. We can do that again. We learned a lot from that experience. We understand as we understood then, but even more so we understand the way to do is it communicate well in advance, do predictable things and move gradually. We're going to be transparent. But honestly, the whole focus on exit is premature if I may say. We're focused on finishing the job we're doing, which is to support the economy, give the economy the support it needs. There are people out there who have lost their jobs. It's essential we get them back to work as quickly as possible. We want to do everything we can to do that and that is our primary focus right now. It's too soon to be worried about that. When we come to exit, we have an understanding of how to do that and we'll do it very carefully but in the meantime our focus is giving the economy the support it needs.
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